In a big push to combat the online advertising dominance of Google Inc and Facebook, three of their top rivals – Yahoo Inc, Microsoft Corp and AOL Inc – have announced a partnership to pool unsold display ad space.
In effect, this means that from January next year, it will become easy and cost effective for advertisers to buy space across all three sites.
The partnership will "offer efficiency of buying premium display inventory at scale," the companies said in a statement from San Francisco on Tuesday.
The alliance is designed to sell some of the less-prized ad space that Microsoft, Yahoo and AOL have had trouble filling on their own.
Even as they share some of their resources, the three companies vowed to retain their independence and compete against each other with separate sales teams. This will help them avoid objections from US anti-trust regulators.
Ross Levinsohn, a Yahoo executive vice president, called the alliance a ''fundamental rethinking'' of the internet ad market.
Rik van der Kooi, corporate vice president of the Microsoft advertising business group, characterised the partnership as a "rising tide that lifts all boats."
"We're not reducing competition in any way, shape or form," said van der Kooi during a news call. "As a result of transparency, the competition is only going to increase. We don't expect any issues (regulatory hurdles)."
"Other players in the industry are welcome to join us. This is not in response to anybody in particular," van der Kooi added, in an attempt to negate the obvious conclusion that the move is directly aimed at Google and Facebook.
The partnership will cover a category of advertising that doesn't typically appear in the prime slots on websites. Microsoft, Yahoo and AOL believe that space will be in higher demand if they can succeed in creating a more efficient, transparent market that helps connect advertisers with the web visitors who are best suited for their marketing campaigns.
Google has become more powerful than ever in internet marketing since it bought DoubleClick's ad service for $3.2 billion in 2008. That deal provided Google with a springboard to leap from text ads that appear next to search results to the graphical messages known as display advertising.
Facebook is attracting more advertising as it becomes increasingly established as the internet's most popular social interaction site. The company accumulates valuable insights into people's interests as its 800 million users share their interests. This has helped Facebook become the leader in US display advertising with a 16 per cent share of the online ad market.
Yahoo, the former leader, has seen its share fall from 18 per cent in 2008 to 13 per cent this year. Google's share of the display market has grown from 2 per cent in 2008 to 9 per cent. Microsoft stands at 5 per cent and AOL is hovering around 4 per cent, according to reports citing research firm eMarketer.
Microsoft's online division has piled up operating losses of $7 billion since June 2008. Revenue at both Yahoo and AOL is steadily falling – in fact, Yahoo has come close to a selloff, and is still not averse to suitable offers to buy all or part of the company.